Popovski: A Second Budget Rebalance Will Be Needed — Not a Good Picture of the Economy

A second budget rebalance will be necessary, which is not a good picture of the economy, assessed former Finance Minister Nikola Popovski. According to him, the deficit in the first half of the year was around 3%, at the end of the third quarter it will be close to 4%, and by the end of the year, according to projections, it will certainly exceed 4%, as reported by Libertas.mk.

“In my assessment, the rebalance will be necessary, the second one, which is not a good picture for our economy, because the deficit by the third quarter will approach the annual level and spending the deficit in the next three months is impossible,” Popovski said. He added that all investments with foreign loans will have to stop — and in North Macedonia all investments in road and rail infrastructure are with foreign loans — while permanent borrowing will increase public debt and make its financing harder.

Data on 3–3.5% GDP growth are encouraging, but two-thirds are owed to the construction sector, he noted. Five highways are being built with foreign loans — Kichevo–Ohrid, Tetovo–Gostivar, Gostivar–Kichevo, Bitola–Prilep and Skopje–Blace — as well as the railway. “When construction stops, with a 20% increase in construction pulling all of GDP, next year growth will go into the negative,” Popovski warned.

Foreign investments in the first half of the year were only about 1% of GDP — “terribly low,” about 180 million euros, he said. As an example he mentioned a Greek company that distributed 13.5 million euros of early dividends to Greece: “Half a billion has been taken back. And these are foreign investments. It takes the income created here and sends it entirely to Greece.” He also called this year’s current account deficit “somewhat worrying.”

On the 1 billion euro pension fund, Popovski said it is a long-term reform and expressed hope that the second pillar will not be canceled, “because it would be a catastrophic mistake.” On early parliamentary elections, he assessed that according to polls VMRO-DPMNE will remain the first party ahead of SDSM, while on the Albanian factor there could be a more noticeable change — and that the current government lacks a chief economist.